Data relevant to the audit of accounts receivable in two companies are tabulated below:

The auditor decides to consider alpha risk only.
Required:

a. Compute the required sample size for each company with replacement.

b. Compute the required sample size for each company without replacement

c. Ignoring your answers in

(a) and

(b) above, assume that 169 customer accounts were selected for confirmation in Company \(X\). If the total audited value of this sample is \(\$ 16,900\) and its standard deviation is \(\$ 52\), may the auditor conclude that book value is fairly stated?

d. Again ignoring your answers in

(a) and

(b) above, assume that 225 customer accounts were selected for confirmation in Company \(Y\). If the mean of the audited sample values is \(\$ 100\) and the sample standard deviation \(\$ 30\), may the auditor conclude that the book value is fairly stated?

Transcribed Image Text:

Client's book value Company X $99,000 Population size Desired reliability Desired precision Estimated standard deviation Company Y $190,00 1,000 2,000 90% 95% $ 8,200 $ 7,000 $ 50 $ 25